James C. Donnan and Treasa Lynn Donnan v. RTJ Capital Group, LLC

• Court: Court of Appeals of Texas
• Decided: July 31, 2024
• Docket: 07-23-00360-CV
• Status: Published

Opinion

In The Court of Appeals Seventh District of Texas at Amarillo

No. 07-23-00360-CV

JAMES C. DONNAN AND TREASA LYNN DONNAN, APPELLANTS

V.

RTJ CAPITAL GROUP, LLC, APPELLEE

On Appeal from the 169th District Court Bell County, Texas1 Trial Court No. 22-DCV-330906, Honorable Cari L. Starritt-Burnett, Presiding

July 31, 2024 MEMORANDUM OPINION Before QUINN, C.J., and PARKER and YARBROUGH, JJ.

Appellants, James C. and Treasa Lynn Donnan, appeal from the summary

judgment granted in favor of RTJ Capital Group, LLC, Appellee (“RTJ”). In four issues,

the Donnans argue that the trial court erred by granting RTJ’s motion for summary

judgment and by awarding it attorney’s fees. We affirm.

1 This case is before the Court on transfer from the Third Court of Appeals pursuant to a docket

equalization order of the Supreme Court of Texas. TEX. GOV’T CODE ANN. § 73.001. BACKGROUND

In 2006, Luke de Lange2 purchased a 79.48-acre tract of land in Bell County (the

“de Lange Tract”). In 2008, de Lange conveyed a 14.986-acre portion of the tract to

Appellants (the “Donnan Tract”). In conjunction with the conveyance, de Lange and

Appellants executed a right of first refusal agreement (the “ROFR”), which granted

Appellants rights of first refusal over the remainder of the de Lange Tract. The ROFR

was recorded in Bell County on April 17, 2008. Under the terms of the ROFR, if de Lange

received a bona fide offer from a third party “to purchase all or any portion of” the

remainder of the de Lange Tract that de Lange was willing to accept, de Lange must first

offer to sell such property to the Donnans on the same terms and conditions as those in

the offer.

In February of 2009, de Lange transferred the remainder of the de Lange Tract to

himself in his capacity as trustee of the Luke de Lange Revocable Trust. In January of

2020, the then-trustee of the trust, Margje de Lange, conveyed the same property to T.

Carroll Estes and Annette Estes, who transferred it to Estes Investments, LLC – Series 8

(“EIL8”) shortly thereafter. The Donnans were not notified of the sale.

In July of 2020, RTJ entered into a contract to purchase ten acres of the de Lange

tract from EIL8. RTJ and EIL8 closed on the purchase on February 3, 2021. The following

diagram illustrates the respective parties’ ownership of the property:

2 We note that Luke de Lange’s surname also appears in the record as “De Lange,” “DeLange,”

“Delange,” and “deLange.” We adopt the use of “de Lange.”

2 After the sale, RTJ became aware that the Donnans claimed a preferential right to

purchase the tract. In January of 2022, counsel for RTJ provided counsel for the Donnans

with a copy of the purchase contract and final settlement statement between RTJ and

EIL8. In his email providing the documents, RTJ’s counsel wrote, “Please let me know

what your client wants to do ASAP.”

In a letter to the Donnans’ counsel two months later, RTJ’s counsel asserted RTJ’s

position that the ten-acre tract purchased by RTJ from EIL8 was not subject to the ROFR

but, to the extent that it was, the Donnans had waived any right they had to purchase

because they never notified RTJ that they were ready, willing, and able to purchase the

property. RTJ requested that the Donnans execute a release of claims related to the 3 property. Four days later, on March 25, 2022, the Donnans filed a lawsuit against RTJ,

along with other parties who are not parties to this appeal, seeking specific performance.

RTJ sought summary judgment on the Donnans’ claims and on its own claim for

declaratory judgment to remove cloud on title. In their motion for summary judgment,

RTJ argued that the Donnans had waived their right to purchase under the ROFR by

failing to exercise it within thirty days of notification of the sale. RTJ further asserted that

it was entitled to summary judgment on its counterclaim for declaratory judgment. RTJ

sought attorney’s fees under the ROFR or alternatively, under the Declaratory Judgments

Act. Following a hearing, the trial court granted RTJ’s motion. All claims between the

Donnans and RTJ were then severed and the Donnans filed this appeal.

ANALYSIS

The Donnans raise four issues in this appeal, two related to the summary judgment

granted by the trial court and two related to the award of attorney’s fees. We review the

trial court’s grant of summary judgment de novo. Lujan v. Navistar, Inc., 555 S.W.3d 79,

84 (Tex. 2018). A movant for traditional summary judgment must show that no genuine

issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R.

CIV. P. 166a(c). In determining whether there is a disputed material fact issue precluding

summary judgment, evidence favorable to the nonmovant will be taken as true and every

reasonable inference will be indulged in favor of the nonmovant. American Tobacco Co.

v. Grinnell, 951 S.W.2d 420, 425 (Tex. 1997).

4 Rights of First Refusal

“A right of first refusal, also known as a preemptive or preferential right, empowers

its holder with a preferential right to purchase the subject property on the same terms

offered by or to a bona fide purchaser.” Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d

640, 644 (Tex. 1996). Generally, the right requires the owner, before selling the property

to another, to offer it to the rightholder on the terms and conditions specified in the

agreement conferring the right. A.G.E., Inc. v. Buford, 105 S.W.3d 667, 673 (Tex. App.—

Austin 2003, pet. denied). A purchaser with actual or constructive notice of a right of first

refusal takes the property subject to that right. Carl M. Archer Tr. No. Three v. Tregellas,

566 S.W.3d 281, 287 (Tex. 2018).

When a grantor sells property in breach of the right of first refusal, the rightholder

attains an enforceable option to acquire the property according to the terms of the sale.

Buford, 105 S.W.3d at 673; see also Martin v. Lott, 482 S.W.2d 917, 922 (Tex. Civ. App.—

Dallas 1972, no writ) (transfer in violation of right of first refusal is equivalent to declaration

of owner’s intention to sell property). However, this option is not perpetual, and the

rightholder must choose between exercising it or acquiescing in the transfer. Buford, 105

S.W.3d at 673. When the rightholder learns of such a sale, he has the opportunity to

elect to purchase or decline to purchase, just as if he had been properly notified of the

offer to buy. Id. The purchaser stands in the shoes of the original seller when specific

performance is sought and may be compelled to convey title to the rightholder. Tregellas,

566 S.W.3d at 287.

5 Issue 1: Offer Triggering Duty under ROFR

In their first issue, the Donnans assert that the summary judgment evidence shows

that RTJ did not make a “valid offer” to the Donnans, either under Texas law or as required

by the ROFR, that would trigger any obligation to act under the ROFR. At a minimum,

the Donnans argue, the evidence creates fact issues as to whether RTJ made a triggering

offer.

The ROFR provides, “If Owner receives a bona fide offer from a third party . . . to

purchase all or any portion of the Property and Owner is willing to accept the . . . Offer,”

then “Owner shall first offer to sell to Donnan the Property . . . .” Thus, under the ROFR,

the duty to offer property to the rightholder does not arise until the owner of the property

encumbered by the right contemplates a disposition of the property. Luke de Lange was

the first owner of the property to have that duty. RTJ is a purchaser that became an

owner subject to that duty. However, RTJ has not attempted to transfer the property and

has therefore not incurred the obligation to satisfy the right of first refusal by offering the

property to the Donnans. That is, an “Owner Offer” conforming to the requirements of the

ROFR is not required in the absence of the owner’s intention to sell the property.

Here, the Donnans’ option to purchase was not triggered by the property owner’s

notice of intention to sell, but rather by the transfer of the property from EIL8 to RTJ in

violation of the Donnans’ right of first refusal. See Martin, 482 S.W.2d at 922 (transfer in

violation of preemptive right is equivalent to declaration by owner that he intends to sell

property). As explained by the Third Court of Appeals in Buford, “When the rightholder

learns of a sale in violation of her right, she again has the opportunity to either accept or

6 reject within the specified time frame, just as if the offer to buy had been properly noticed,

i.e., she must either elect to purchase or decline to purchase.” Buford, 105 S.W.3d at

673 (emphasis added); see also Jarvis v. Peltier, 400 S.W.3d 644, 652 (Tex. App.—Tyler

2013, pet. denied) (same). Because RTJ was not in the posture of an owner

contemplating a sale of the property, RTJ was not required to make an offer conforming

to the express requirements of the ROFR or of Texas law. Instead, RTJ had “a duty to

make reasonable disclosure of the terms of the purchase to the rightholder.” Jarvis, 400

S.W.3d at 652; see also Koch Indus., Inc. v. Sun Co., 918 F.2d 1203, 1212 (5th Cir. 1990)

(applying Texas law; same).

The Donnans do not dispute that on January 26, 2022, via counsel, RTJ provided

them with a copy of the transaction documents, namely the purchase contract between

RTJ and EIL8, the related settlement statement, and check to the title company. RTJ

thus discharged its obligation to make reasonable disclosure to the Donnans, triggering

the Donnans’ duty to make an election to either exercise their right or acquiesce in the

transfer. See Comeaux v. Suderman, 93 S.W.3d 215, 220 (Tex. App.—Houston [14th

Dist.] 2002, no pet.) (“[B]ecause Comeaux received notice and was given the opportunity

to exercise his right of first refusal, technical deficiencies in the notice or even no notice

cannot revive the right he declined.”); see also McMillan v. Dooley, 144 S.W.3d 159, 178

(Tex. App.—Eastland 2004, no pet.) (preferential right was triggered by burdened oil and

gas lease’s sale in transaction involving two additional leases; defendants made sufficient

presentment by making reasonable disclosure of terms of conveyance).

Moreover, we disagree with the Donnans’ argument that RTJ could not trigger the

Donnans’ obligation to act because RTJ could not and did not offer to sell the entire tract 7 subject to the ROFR. The ROFR includes no express limitation on the sale of only a

portion of the property, as it contemplates offers to purchase “all or any portion” of the

property. Thus, we conclude that RTJ’s disclosure of the terms of its purchase of a 10-

acre portion of the ROFR tract triggered the right of first refusal with respect to that portion.

See Hicks v. Castille, 313 S.W.3d 874, 883 (Tex. App.—Amarillo 2010, pet. denied)

(agreement granting right of first refusal as to four-acre tract allowed owner to sell portion

of tract, as holding otherwise would cause unreasonable restraint on alienation by

prohibiting owner from selling any portion less than entirety of tract). We conclude that

RTJ’s failure to make a “valid offer” to the Donnans does not preclude summary judgment.

We overrule the Donnans’ first issue.

Issue 2: Waiver of Rights under ROFR

In their second issue, the Donnans argue that the summary judgment evidence

creates multiple fact issues regarding RTJ’s claim that the Donnans waived their rights

under the ROFR.

When, as here, the holder of a right of first refusal learns of a sale in violation of

his rights, he “has the opportunity to elect to purchase or decline to purchase within the

time frame specified in the contract creating the right of first refusal.” Jarvis, 400 S.W.3d

at 652; see also Buford, 105 S.W.3d at 673. The contract creating the right of first refusal

is the ROFR. The ROFR provides for the Donnans to notify the property owner of their

election to purchase within 30 days of receiving the offer. Consequently, we reject the

Donnans’ argument that they were entitled to a “reasonable time,” rather than the 30-day

period established by their contract, in which to act.

8 As explained in Buford, the specified time frame also applies when the option is

triggered by a sale in violation of the right rather than by an owner offer. Buford, 105

S.W.3d at 673 (in case of such sale, duty to elect and time frame operate “just as if the

offer to buy had been property noticed . . . .”). Once the Donnans’ preferential purchase

right matured into an enforceable option, it was incumbent upon them to exercise that

option within the 30-day period established in the ROFR.

The summary judgment evidence shows that the terms of RTJ’s purchase were

disclosed to the Donnans on January 26, 2022. The Donnans thus had 30 days from

January 26 in which to make their election. The Donnans did not notify RTJ of their intent

to exercise their right to purchase in that time frame. Not until RTJ sought a written

release, almost 60 days after the triggering event, did the Donnans express to RTJ that

they were ready, willing, and able to exercise their option.3

The ROFR provides that, if the Donnans fail “to timely exercise [their] rights to

purchase within the 30 days described [in the ROFR], then such right shall lapse . . . .”

The loss of their option to purchase was the consequence of the Donnans’ failure to

comply with the contract’s provision requiring that an election be made in the 30-day

period.4 See Ellis v. Waldrop, 656 S.W.2d 902, 904 (Tex. 1983) (where right of first

refusal agreement provided that rightholder had “a reasonable time, not to exceed 30

days” to exercise right after receipt of offer, failure to exercise right within 30 days resulted

in waiver of right); Buford, 105 S.W.3d at 673 (power of acceptance lapses upon

3 The Donnans stated this intent in the lawsuit they filed on March 25, 2022.

4 Because the ROFR expressly provides that the right to purchase lapses upon expiration of the

30-day period, we reject the Donnans’ claim that any waiver of their right had to be reduced to writing.

9 expiration of time specified in offer); see also Conoco, Inc. v. Amarillo Nat’l Bank, 950

S.W.2d 790, 795 (Tex. App.—Amarillo 1997, no writ) (“Waiver occurs when a person,

who has full knowledge of the material facts, acts or fails to act upon a right which he

legally holds, and such act or failure to act is inconsistent with that right or the intention

to rely upon that right.”).

Finally, we are unpersuaded by the Donnans’ claim that RTJ lacked standing to

demand action within the 30-day period provided by the ROFR. A contracting party

cannot accept the benefits of a contract and disclaim its obligations. Excess Underwriters

at Lloyd’s, London v. Frank’s Casing Crew & Rental Tools, Inc., 246 S.W.3d 42, 74 (Tex

2008) (Wainwright, J., dissenting); Daniel v. Goesl, 341 S.W.2d 892, 895 (Tex. 1960) (one

who accepts benefits of contract must also assume its burdens). As litigants asserting

their rights under the ROFR, the Donnans must accept the other provisions of the ROFR,

including its time limitations.

We conclude that, because the Donnans failed to exercise their right of first refusal

within the time frame required under the ROFR after being notified of the terms of the

sale, the option was extinguished. We overrule their second issue.

Issues 3 and 4: Attorney’s Fees

The trial court awarded RTJ $34,518 in reasonable and necessary attorney’s fees

for proceedings at the trial court, along with $15,000 in contingent fees for proceedings

before this Court and $22,500 in contingent fees for proceedings before the Supreme

Court of Texas. In their third and fourth issues, the Donnans claim that RTJ is not entitled

to any attorney’s fees, either under the ROFR or under the Declaratory Judgments Act.

10 In both its appellate brief and in argument to the trial court, RTJ has affirmatively

disclaimed any request for attorney’s fees under the Declaratory Judgments Act.

Therefore, we consider only whether it is entitled to attorney’s fees under the ROFR.

In its answer and counterclaim, RTJ made a general request for attorney’s fees

but did not identify the basis for that request. The Donnans argue that the only theory

RTJ pleaded in support of attorney’s fees was its claim under the Declaratory Judgments

Act. However, in its motion for summary judgment, RTJ requested an award of attorney’s

fees “based on the terms of the ROFR.” In their response to the motion, the Donnans did

not object to RTJ’s failure to plead for attorney’s fees in its answer. Therefore, the

Donnans waived any complaint regarding RTJ’s request being made in its motion rather

than in its answer and counterclaim. See Ogle v. Hector, No. 03-16-00716-CV, 2017 Tex.

App. LEXIS 7210, at *8 (Tex. App.—Austin Aug. 2, 2017, pet. denied) (mem. op.), and

cases cited therein (by failing to object to opponent’s failure to include request for

attorney’s fees in answer, party waived complaint that request was made only in motion

for summary judgment). The ROFR provides for attorney’s fees to be awarded to a party

prevailing in a suit to enforce or construe the agreement. Therefore, RTJ is entitled to

attorney’s fees under the ROFR.

Lastly, the Donnans claim that RTJ is not entitled to any contingent appellate fees

because the summary judgment evidence in support of those fees was untimely filed and

RTJ failed to show good cause for its late filing. Summary judgment evidence may be

filed late, but only with leave of court. Benchmark Bank v. Crowder, 919 S.W.2d 657, 663

(Tex. 1996). We review the trial court’s decision regarding leave to file summary judgment

evidence late for an abuse of discretion. Campbell v. Auto. Ins. Co. of Hartford Conn., 11 No. 07-06-00158-CV, 2007 Tex. App. LEXIS 3643, at *10–11 (Tex. App.—Amarillo May

9, 2007, no pet.) (mem. op.). A trial court abuses its discretion when it acts without

reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701

S.W.2d 238, 241–42 (Tex. 1985).

RTJ filed its motion for summary judgment on February 28, 2023. The hearing on

the motion was set for April 21. On April 20, RTJ filed a motion for leave to file

supplemental summary judgment evidence, which consisted of a short declaration by

RTJ’s counsel regarding his estimate of reasonable and necessary attorney’s fees in the

event of an appeal. RTJ’s motion asserted that the original declaration “inadvertently

omitted a final paragraph that provided an opinion on reasonable and necessary

attorneys’ fees that would be incurred on appeal.” The hearing went forward on April 21.

At the conclusion of the hearing, the trial court granted RTJ’s motion for summary

judgment. The trial court also granted the motion for leave, adding to its order that the

Donnans “have reasonable time to respond to the request” regarding evidence of

appellate attorney’s fees. On May 3, 2023, the Donnans filed a response to RTJ’s motion

for leave arguing that RTJ was not entitled to attorney’s fees.

In Wheeler v. Green, the Supreme Court of Texas reaffirmed that allowing a late

summary-judgment response was proper upon a showing of (1) good cause, and (2) no

undue prejudice. 157 S.W.3d 439, 442 (Tex. 2005). “Good cause is established by

showing the failure involved was an accident or mistake, not intentional or the result of

conscious indifference.” Id. Undue prejudice may result if the proceedings are delayed

or the opposing party’s ability to prepare is significantly hampered. Id. at 443. Here,

12 RTJ’s counsel asserted that information regarding appellate attorney’s fees was

“inadvertently omitted,” indicating an accident or mistake. Additionally, the trial court

granted the Donnans additional time to respond to the late-disclosed information

concerning attorney’s fees, allowing them the opportunity to prepare a response. In their

response, the Donnans did not challenge the amounts of the contingent fees, nor did they

claim undue prejudice or lack of good cause. Given these facts, we conclude that the

trial court did not abuse its discretion in granting RTJ leave to file late summary judgment

evidence. We overrule the Donnans’ final issue.

CONCLUSION

Having overruled each of the Donnans’ issues on appeal, we affirm the judgment

of the trial court.

Judy C. Parker Justice